As the global network expands, different corporations seem to be positioning themselves to exploit different classes of services. We saw the first group, including AT&T, Verizon, Comcast, and Time Warner Cable, emerge around 2004 as the internet’s broadband service providers. By 2006 Google and Apple were taking advantage of high broadband usage to place content providers on an equal footing. In 2010, as a stalemate between large distribution and content companies developed, there is now the first proposal by representatives of both camps on how the internet should be governed.
In August 2010, Google and Verizon proposed a controversial legislative agenda to the FCC. The proposal recommends that the commission recognize three classes of internet service: 1) traditional wired broadband network access that should not impose different fees for faster connections, and be regulated to preserve the Internet’s “open” nature; 2) proprietary networks that can charge higher rates for premium services, much like cable and satellite companies, and; 3) wireless mobile services, which are to be left unregulated, presumably to encourage more investment.
Reaction to the proposal has been pointed, especially since the FCC was already holding “discussions” for several months with Google, Verizon, and their competitors on “Net Neutrality”, the policy for open and non-discriminatory access. Commentators from the traditional media, the developer community, and advocacy organizations have all weighed in on a number of points and with a variety of opinions. Major corporations also seemed divided on the proposal: AT&T supported it, while social media giant Facebook did not.
Google’s adoption of net neutrality, we recall, is part of a series of revisions to its business model since the search and advertising business began leveling off in 2005, and increased since the hiring of Eric Schmidt in 2007 as CEO. Verizon has also adopted net neutrality principles to distance itself from other telecom providers, notably AT&T, in part to share in the open source market revealed by Google and other companies. The 2010 Google-Verizon proposal suggests that Google may now feel that carriage with Verizon, or another large internet service provider, may be a better course of action than building its own high speed networks.
Google is not the only company changing due to the internet. Many of America’s largest corporations are making similar moves, including Best Buy, Clear Wire Communications, Verizon, AT&T, and most major banking institutions. It is no coincidence that a major focus is on mobile services. There is evidence from many sources, including the Obama Administration and research organizations, such as Nielsen and ComScore, which note the growing number of mobile users over commercial wireless networks.
In light of these developments, the consensus of government and industry opinion suggests that a major retooling of communications and global commerce strategies is taking place. These strategies include more wireless mobile connectivity, visual display of goods and services on high definition smartphones and handheld devices, such as an IPad, and better use of social media on those same devices.
Such strategies will be much easier to implement, Google and Verizon imply, if distinctions are made by the FCC among types of services and the relative costs to provide those services. In the end, Google’s and Verizon’s purpose in offering the proposal may be to point out different classes of services, and to propose how each of those services should and should not be regulated.
The problem with this proposal, even if the FCC adopts it, is that it probably won’t work. There is historical evidence that suggests new technology will often force such regulatory schemes to become irrelevant. For example, wireless telegraphers and radio companies in the early 20th century, with the backing of the American government, kept broadcast radio in limbo until the late 1920’s and 30s when improved sound quality made entertainment programming universally popular. Television broadcasters in the 1960’s and 70’s lobbied the FCC into relegating cable television to a duplication service, until satellite services made cable more competitive in the 1980’s.
A similar pattern seems to be occurring in the internet period. Telecommunication providers and web application companies hoping to protect proprietary and wireless networks from oversight may eventually confront innovations that make some networks obsolete. This may already be occurring if we consider services offered by Skype (global video and voice calls), Dell and HP (handheld devices), Facebook (social media with video and voice), and the growing number of independent open source applications, ironically encouraged by Google’s Linux based platforms. These examples do not include companies in China, India, Brazil, and Russia, which have the capability to develop hardware and software as cheaper, more efficient alternatives.
In the new reality that is the internet, technical innovation will usually trump whatever regulatory scheme is set up to control the marketplace. It is only a matter of time, and if history is any yardstick, that time frame seems to be getting shorter and shorter.
Let’s put this latest development in a larger context.
• Google and Verizon’s proposal would have been impossible if the internet service provider market had remained concentrated in the hands of a few companies. In other words, there has to be a breakdown of consolidation and monopoly practices, which go back more than a century in the United States, for open networks to emerge. This may have already begun. The FCC’s push for net neutrality is a further step.
• In addition to less consolidation, new technology continues to erode traditional market barriers. We saw examples with the introduction and development of cable television, then with the evolution of the internet: both were instances in which newer technologies can allow circumvention of distribution and content production to take place, in each case through the introduction of interactive capabilities. Google, Verizon, and others are able now to contribute to this tradition.
• The internet provides the unprecedented case in which interactivity encourages content production, an area that was controlled by professionals employed by the largest companies. This is also a change from the past, previously dominated by the “broadcast model” of radio and television. Again, new technology, in the form of the global network and software applications that service narrower interests over new devices like smartphones, speed this creative activity along.
• Despite the introduction of new technology, regulation should not be disregarded. Government oversight often cuts different ways. It can be heavy handed to support national interests and policies, as we saw with the regulation of wireless telegraphy and early radio by the Navy in the early 20th century. Regulation can also be more subtle and selective, as we saw in the earlier discussion of broadcast radio and television through the 1990’s.
• Government oversight of technology may also be absent when the pace of innovation is faster than regulatory agencies can respond. We saw this in the early history of the telephone industry around 1870, with wireless telegraphy in the 1890’s, and most recently, as the FCC attempts to formulate its policy of Net Neutrality. Google and Verizon are filling the void left by a lack of oversight.
• All of this suggests the need for government authority over all internet activity, but light handed enough so that the needs of users are served, while investment will not be discouraged. The Google-Verizon proposal, flawed as it may be, could then be viewed as an opportunity to better define what “open” and “neutral” really mean, not only for different types of services, but also different classes of users.
Notes
NYT Editorial, http://www.nytimes.com/2010/08/14/opinion/14sat1.html?_r=1&partner=rssnyt&emc=rss
Google-Verizon Statement, http://googlepublicpolicy.blogspot.com/2010/08/facts-about-our-network-neutrality.html
NPR, For the Record, http://www.npr.org/blogs/therecord/2010/08/13/129176208/you-ve-got-to-change-your-don-t-be-evil-ways
Ars Technica, http://arstechnica.com/telecom/news/2010/08/a-paper-trail-of-betrayal-googles-net-neutrality-collapse.ars
Public Knowledge, http://www.publicknowledge.org/blog/theres-only-one-internet
PC World, http://www.pcworld.com/article/202970/googleverizon_net_neutrality_pact_5_red_flags.html?tk=fv_rel
Nielson, http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=133965
ComScore, http://www.mobilemarketingwatch.com/local-mobile-search-stats-up-14-to-17-3m-users-mobile-web-leads-apps-growing-8602/
White House Wireless Memo, http://www.whitehouse.gov/the-press-office/presidential-memorandum-unleashing-wireless-broadband-revolution
AT&T supports it, http://blogs.wsj.com/digits/2010/08/13/no-shock-att-backs-wireless-exemption-from-net-neutrality/
Facebook does not, http://voices.washingtonpost.com/posttech/2010/08/silicon_valley_criticizes_goog.html
Google business model revisions, http://www.smallbizdr.net/2010_04_01_archive.html
Radio programming, http://www.smallbizdr.net/2007/10/episode-2-rca-and-emergence-of-american.html
Cable breaks out, http://www.smallbizdr.net/2008/01/cable-breaks-television-monopoly.html
Internet control breaks down, http://www.smallbizdr.net/search?updated-min=2008-01-01T00%3A00%3A00-08%3A00&updated-max=2009-01-01T00%3A00%3A00-08%3A00&max-results=4
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